Fantastic Mr Fox
27 November 2000
The Past year has seen the emergence of some major issues in the football world and for the lawyers who work in the industry. In particular, the attention has focused on the proposed scrapping of the existing transfer system, which had been attacked by the EU for breaching European employment laws by restricting the free movement of employees.
Lawyers who work not only for Premier League clubs such as Leicester City (the "Foxes"), but also those who work for first, second and third division teams across the European Union, have been forced to tackle the delicate issues of the legal status of players, the restructuring of club contracts and compensation payments between clubs. Leicester City's head of legal Jonathan Waltho has been negotiating with the EU as part of a working group from the industry. He says: "We hope to try to source a compromise to protect the best parts of the current system, and solve the legal issues, potentially by creating a special status for sport in the Treaty of Rome and establishing a new system of compensation between clubs."
If the EU does not concur with the wishes of the football clubs, it could mean that players could leave at any time - even while under contract - and that their clubs would have little or no power to demand a transfer fee. This is a move that would essentially destroy the lucrative industry of inter-club transfers. It would be particularly detrimental to smaller clubs, which depend on the existing transfer system as their main financial lifeline.
The massive growth in television revenue, guaranteed by June 2000 in the form of the £1.1bn three-year BSkyB rights deal, is another important development. It could provide up to £25m per season to each of the Premier League teams. Waltho admits that for the sake not only of the team and its supporters, but for Leicester City FC's merchandising and many associated businesses, it is "incredibly important that Leicester City remain in the Premiership this season".
At this stage of the season, though, it seems that there is little chance of the team losing its Premier League slot, which it secured in 1996. The team was third in the table as The Lawyer went to press, despite the loss of its main striker Emile Heskey earlier in the season.
But players and their comings and goings are not the essence of Leicester City's legal work. Waltho says: "It's important to get across that we deal with things other than players' contracts. I'm a big fan of Leicester City, and it certainly helps when you love the product that you're selling. Footballers are the high profile, front line of the business, but it's mostly in the off-field business activities that my work comes in, with commercial agreements and the running of our conferencing centre."
Waltho left Denton Hall (now Denton Wilde Sapte) to begin work at the club in August 1998, just a few months after its reverse flotation into the smaller Soccer Investments plc. The move into becoming a listed plc was handled by Hammond Suddards Edge, the club's preferred firm, with the help of PricewaterhouseCoopers and Apax Partners & Co.
The majority of Waltho's work has focused on the club's two main projects: the selling of a 9.9 per cent stake in the club to technology company NTL, and the development of a new 40,000-seater stadium complex. He is currently working alongside NTL on a joint venture to make full use of the relationship and increase the club's online presence. "It's a joint venture to exploit our internet and e-commerce rights, allying NTL technology with our brand," says Waltho. "It means that we'll be able to drive our niche market - our supporters - online to a site because our name is associated with it."
The proposed new stadium, however, has led to a lot of outsourcing from the club's in-house legal department. Waltho recognised the need for specialists early on in the negotiations, which began in 1998. "The proposed new stadium called not only for lawyers, but for consultants and surveyors. We needed specialists to deal with issues like land acquisition, so we contacted Eversheds' Nottingham office. Construction, planning and property issues are being dealt with by Hammonds."
And in most areas, Hammonds is the firm of choice. Waltho says: "We have an historical link with [Hammonds]. They took us through our flotation in 1997. I have very good personal relationships with all the people there; they understand our business and are impressive in all the particular areas where we require advice. Hammonds is a good firm with a developing sports department, and for us it is an essential one-stop shop."
The areas that are generally outsourced are corporate work, specialist employment, IT and even some smaller work, such as liquor licensing. And although the majority of this is given to Hammonds, other local firms are also used for lower-cost work. "Our preference is to keep the work with one firm, but we do conduct annual reviews, and sometimes we decide that it's more cost effective to outsource certain lower-cost work, such as employment matters, to smaller local firms," says Waltho.
With such a small legal department, Leicester obviously outsources a lot of its work, though the exact percentage depends heavily on the amount of work already being dealt with by Waltho and on the amount of specialism involved. "I trained in the Milton Keynes and London offices of Denton Hall, working mainly in company and commercial work, although I worked a lot for Premier League clients. We had a good sports law department there," says Waltho. "If the specialists required are in this area then I'm well equipped to deal with them myself."
Because of his commercial and company experience, Waltho deals mainly on a day-to-day basis, with broadcasting agreements, sponsorship, merchandising, advertising, licensing and travel. His role as a business director, though, also involves him in issues affecting the club's conference and banking centre, printing arm, publication department and community office, as well as a number of other business areas. Waltho's job involves a lot of dealing with other solicitors and firms, deciding who is best to deal with a particular issue. "I deal a lot with law professionals. It's important to have a central source for dealing with everybody to help keep a handle on legal costs."
There are busy times ahead for the legal department of Leicester City FC. Much of its success depends heavily on the team's performance. According to Waltho: "A thriving team is a thriving brand. Currently we have a flourishing non-match day operation as well." And with the team continuing to do so well in the Premiership, the legal department will be dealing with increased demands for sponsorship deals and advertising, as well as overseeing the growth in its own merchandising and conferencing businesses.
Waltho believes that "Leicester City is not the exception; every football club should have an in-house legal department, someone with a grounding to give common sense legal control to protect the company."
He goes on to say: "Without internal controls, clubs can enter into contracts foolishly. It's not simply a case of lost money, but the effect of overlooked provisions and how the deal fits together for the company."
And he sees himself as just the man for the job. "When the job came up in-house for Leicester City, I applied. This was with the team I've always supported! It's wonderful being involved at board level in a highprofile area of the law. There's a wide variety of issues involved in working at a football club. So whether it's dealt with in-house or passed on to an outside firm, there's always a lot of work and areas of law to be covered."
Company secretary and group solicitor
Leicester City plc (and Leicester City Football Club plc, wholly-owned subsidiary)
|Organisation||Leicester City plc (and Leicester City Football Club plc, wholly-owned subsidiary)|
|Sector||Leisure and hotels|
|Employees||180 full time and 900 on a match day|
|Legal capability||One lawyer|
|Head of legal||Company secretary and group solicitor Jonathan Waltho|
|Reporting to||The Board, in particular chief operating officer and finance director Steve Kind|
|Main location for lawyers||City Stadium, Filbert Street, Leicester|
|Main law firms||Hammond Suddards Edge|